A key or major tenant, usually in
reference to a commercial shopping centre,
that will attract other businesses as well
as consumers.
Anchor tenants generally consist of
commercial operations such as department
stores, major fashion outlets, drug stores,
and supermarkets. Large commercial centers
will normally have more than one anchor
tenant. This category of tenant will
frequently employ personnel such as in-house
solicitors specializing in leases and lease
negotiations, real estate managers, and
construction and research/design
departments.
Typically, anchor tenants require their
particular form of lease document in
negotiations with the landlord. The landlord
may agree to the lease form given the
potential subsequent draw of other tenants
and the value of having an anchor tenant for
mortgaging and sale purposes.
Anchor tenants can also exercise
significant control within the centre. For
example, they may require the landlord not
to make construction additions without their
consent. In instances where the centre is
only partially completed, the anchor
tenant(s) may require that:
A certain parking ratio be
maintained.
Their vista be kept clear to ensure
visual impact.
No high parking requirement tenants
(e.g., movie cinemas) be permitted
without their consent.
Research on anchor tenants indicates
that rental rates of smaller tenants are in
part affected by the presence of an anchor
tenant. The loss of such a tenant can impact
remaining tenants owing to the declining
drawing power of the shopping centre. This
often translates into reduced sales that
affect percentage rents being paid to the
landlord and may also pose collection
problems from existing tenants if store
revenues falter. Consequently, the value of
the shopping centre can also diminish given
income lost from the departing anchor tenant
and ramifications of that loss on other
tenants. The loss may also extend to the
municipality through erosion of the tax
base.
Example
of an Anchor Tenant
Developer Reed is constructing a retail
mall containing 25 units ranging in size
from 1,000 to 4,000 square feet. Reed has
provision for a 35,000 square foot food
store that hopefully will become a local
grocery outlet for the neighborhood. The
grocery store will be the anchor tenant in
this retail mall and is expected to generate
additional traffic to the site, promote
interest in the project from other potential
tenants, represent a stable income source as
other tenants are gradually recruited, and
represent a key element in obtaining base
rent rates in the range of $15.00 to $18.00
per square foot.
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